Following years behind bamboo curtain, Laos expected to join WTO

BANGKOK -- Isolated for decades, impoverished and landlocked, Laos is not an obvious choice for investors.

But the Communist country of 6.4 million people hopes to change that with its expected entry into the World Trade Organization (WTO) on Friday, capping years of steady reforms aimed at building a modern economy and tapping a Southeast Asian boom as global manufacturers hunt for lower-cost alternatives to China.

“Laos now seems to be genuinely competitive, unlike before,” said Hal Hill, a professor at Australian National University who specialises in Southeast Asian economies.

After 15 years of talks, the 157-member, Geneva-based world trade body is expected to confirm Laos as a member on Friday. Laos' parliament expects ratification by 2013, touting the move as crucial for reducing one of Asia's worst poverty rates.

The transition, however, looks difficult. Reducing red tape and enforcing pro-business regulations are proving more formidable for the Lao People's Revolutionary Party (LPRP) than crushing political dissent and chasing anti-communist rebels during nearly four decades of authoritarian, single-party rule.

In one imminent test case, Macau-based casino operator Sanum Investments Ltd has started international arbitration proceedings after the government took away its 60-percent stake in the Thanaleng Slot Machine Club in the Lao capital, Vientiane.

Sanum President Jody Jordahl says his Lao partners conspired with “extremely well-connected people” to take control of the club when it started to generate good profits. Sanum could also be stripped of its stake in casino Savan Vegas for failing to pay US$23 million in taxes that Jordahl said were not part of their agreement. Sanum executives face jail.

“They have regulations but no intention to follow them. If this is how they'll treat foreign investors, then they're not ready to be integrated into the global economy,” Jordahl said.